A Love Letter to the Sacramento Natural Foods Co-op

Sacramento’s food co-op has long occupied a place in my heart and imagination, even though I have only visited the city once and am most assuredly not a member.  I befriended several directors of the Sacramento Natural Foods Cooperative years ago, and that led me to become impressed by the passionate commitment to the consumer cooperative model in California’s capital city.

Evidence of that commitment is on prime display this month as members of the Sacramento Co-op vote on an ambitious effort by the Board of Directors.  The Board has taken on the herculean task of trying to rewrite the co-op’s bylaws – basically, the constitution of the Sacramento Natural Foods Co-op.  And a small but committed group of co-op members has taken on the David v. Goliath task of trying to defeat the proposal.

Let’s get this out of the way first:  The work that went into the proposed new bylaws, and the energy the opponents are devoting to defeating the proposal, are both signs of cooperative health and vibrancy.  As cooperators, we often extoll the virtues of our democracy – but sometimes we forget that real democracy involves disagreement.  In fact, one could say that the more passionate the disagreement gets, the more certain it is that the co-op in question is thriving.  Nobody argues over a co-op that is irrelevant to its community.

And let’s get this out of the way second:  I’m an outsider, and can be written off as such.  The first Cooperative Principle is autonomy and independence, and that means the world of cooperators outside of Sacramento ought to let Sacramentans run their co-op.

On the other hand, I’m a lawyer who specializes in (among other things) cooperatives – and, as a longtime director of my co-op in New England, I have seen similar controversies roil through cooperative grocery establishments across the continental U.S. in the past few years.  I am a fan of peer-to-peer networking among co-op directors – and, so, in that spirit, I offer up some comments.

I think the members of the Sacramento Natural Foods Co-op should send their Board back to the drawing board – telling the directors, in effect, that their proposal is a fine first effort that needs a bit more work before being enshrined as the co-op’s governing document.

My reasons, though, are somewhat different than those given by the Friends of the Co-op group that has coalesced to defeat the bylaws proposal.  Here’s my list of concerns:

1.      Term Limits: They are profoundly undemocratic.  Yes, some directors overstay their welcome.  Yes, incumbents can be hard to defeat.  But if you believe in democracy, why would you tell the members that their most experienced directors are ineligible to be chosen by the electorate?  This particular term limits proposal is especially troubling because it appears to impose a lifetime cap of ten years – a director cannot get around the limit by leaving the Board and then returning.

2.     Diminishing the Board: It is no mere cosmetic change to decide, as these new bylaws would, that the officers of the Board are no longer the officers of the corporation (i.e., the president, vice, president, treasurer and secretary).  It is an essential feature of the cooperative identity that the officers of the organization are directors who are elected from among the member-owners.  Rejiggering the organization so that the officers of the Board become the chairperson, vice chairperson, etc., while at the same time reconfiguring the general manager’s title to “CEO,” is the sort of cultural shift that undermines the organization’s cooperative identity.  Every food co-op is sometimes tempted to imitate the investor-owned monoliths with which we compete.  Democratic member control is a feature and not a bug of co-ops – it deserves to be honored and celebrated.

3.     Outside Investors:  Nothing distinguishes a cooperative more decisively from other kinds of enterprises than the fundamental notion that a co-op is owned by its users (i.e., in the parlance of cooperative law, its patrons).  At every other kind of business, there are investors who devote their capital to the organization because they want to maximize their profits.  So, allowing non-members to buy preferred shares in the Sacramento Natural Food Co-op would occur at the expense of the cooperative soul of the organization.  It’s true that non-member owners of preferred shares would not vote – that’s why the idea is legal for a co-op – but the existence of a growing number of non-member investors can only serve to dilute the Co-op’s devotion to the interests of its members.  I have a lot of sympathy for this proposal – I know how hard it is for consumer co-ops to raise capital – but this particular bargain is too Faustian for me.

4.     Secret Board Meetings: There is a reason why elected legislative bodies like the U.S. Congress and the California Legislature must transact their business in person – the give-and-take of democracy requires people to be in the room together, communicating with each other via all available senses.  It may be, eventually, that electronic meeting technologies will arise that will be even better than in-person meetings because the technologies would allow even more complete participation and transparency.  But a blanket authorization telephonic meetings, and executive (closed) sessions for not just the usual stuff but for “other” unspecified “matters” (see section 2.10), involves too much mischief potential.  Even a Board resolutely dedicated to the Cooperative Values and Principles risks allowing cynicism and mistrust to proliferate by finding reasons to operate in secret.

5.     Unjustifiable expulsion:  Currently, the bylaws provide (in section 5.03) that the Board may expel a member of the co-op for “(1) having failed to comply with the Bylaws, rules or regulations of the Cooperative; (2) having failed to patronize the Cooperative during the immediately preceding fiscal year of the Cooperative in a minimum amount to be set by the Board; (3) being delinquent on the payment of their fair share for one calendar year or more; or (4) any other justifiable reason.”  The proposed bylaws (section 607) would streamline this to three possible bases for expulsion:  “(a) having failed to comply with the Bylaws, rules or regulations of the Cooperative; (b) having failed to comply with the Membership contract; or (c) any other reason.”  In reality, the co-op needs only ground (a) as a basis for expulsion – anything else is an invitation to arbitrary exclusion.  The transition from “any other justifiable reason” to “any other reason” is especially troubling because it can’t be read as anything other than authorizing completely arbitrary exclusion.  It’s an ominous step if you truly believe in the Cooperative Principle of voluntary and open membership.

The Friends of the Co-op group has used its Facebook page to level some pointed criticisms at the Board for the process it has used to present the proposed new bylaws to the membership.  I find most of that discussion unhelpful, and even harmful when it veers into questioning the motives of those who have labored to craft the proposal.  However, I do emphatically part company with the Board on one procedural tactic:  the lack of a thorough, line-by line comparison of the old bylaws with the new.

The Board’s “FAQ” document has this to say about the lack of a redline comparison:  “The intent has been to retain the values and spirit of the cooperative in the redraft, yet to allow the board to forward the best document possible. In order to achieve the purposes needed or of clear value, as well as keep the document readable, the new set of bylaws was written from scratch. In fact, if you put both documents into Word and tell it to produce a redline, it simply crosses out the old set in its entirety, and replaces them with the new set. The current bylaws are available on the Co-op’s website.”

This is singularly unpersuasive.  The fact that Microsoft Word does not readily spit out a comparison of the two documents is not an excuse for failing to provide the electorate with a full accounting of precisely what they are being asked to change.  The U.S. Constitution was a complete rewrite of the Articles of Confederation, but those who gathered in 1789 to craft new national bylaws surely took the time to explain to the states – and thus the public generally -- the details of what they were doing.  The members of the Sacramento Natural Foods Co-op deserve no less from the framers of their proposed ‘constitution.’

The members of this fabulous California cooperative owe their Board of Directors a debt of gratitude for all of the work and insight the Board has devoted to redrafting the bylaws.  The directors, in turn, owe the members still more work because this edition is not ready for ratification.  Even the U.S. Constitution required the addition of the Bill of Rights in order to be truly worthy of enshrinement as a binding governance document.